110-Building Site in N.Y. Is Put Up for Sale
By CHARLES V. BAGLI and JANNY SCOTT Published: August 30, 2006
Metropolitan Life is putting Stuyvesant Town and Peter Cooper Village — a stretch of 110 apartment buildings along the East River — on the auction block.
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The sale of Stuyvesant Town and Peter Cooper Village, shown in 1947, would transform a complex built for World War II veterans.
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Graphic: The Big Deal
With a target price of nearly $5 billion, the sale would be the biggest deal for a single American property in modern times. It would undoubtedly transform what has been an affordable, leafy redoubt for generations of Manhattan’s middle class: teachers and nurses, firefighters and police officers, office clerks and construction workers. MetLife, one of the largest life insurers in North America, said in July that it might sell the two complexes, which it built nearly 60 years ago with government help. It has hired a broker, who started registering
bidders last week for the 80-acre property along First Avenue between 14th and 23rd Streets. Behind the scenes, the sale has already drawn interest from dozens of prospective buyers, including New York’s top real estate families, pension funds, international investment banks and investors from Dubai, according to real estate executives, even though the marketing book will not be released to bidders until next week. The deal is likely to lead to profound changes for many of the 25,000 residents of the two complexes, where two-thirds of the apartments have regulated rents at roughly half the market rate. Any new owner paying the equivalent of $450,000 per apartment is going to be eager to create a money-making luxury enclave, real estate executives say. The sale would only add to the seismic cultural shifts already under way in New York City and especially in Manhattan, where soaring housing costs have made the borough increasingly inhospitable to working-class and middle-class residents. It would be another challenge to Mayor Michael R. Bloomberg’s effort to stabilize and expand the number of affordable apartments in the city. “It’s really sad,” said Suzanne Wasserman, a historian and filmmaker who has lived in Stuyvesant Town since 1989. “New York has always attracted people who aren’t just interested in money — people interested in culture and poetry and music and dance and those young people who are the creative capital of the city. They aren’t going to have a place here and probably really don’t already. I think it affects everything about city life.” Rumors of an impending sale began circulating among residents several years ago when MetLife was in the midst of $300 million in upgrades that included new landscaping and playgrounds, sprucedup fountains, new wiring, air conditioning, carpeting and lights. Rose Associates took over management three years ago.
At the same time, MetLife sought to oust tenants not listed on leases. And as rents for more apartments hit the legal threshold of $2,000 a month, MetLife has been able to charge new tenants market rates for those apartments when they became vacant. Under that threshold, the rent stabilization law limits increases to a fixed percentage each year for about a million apartments. About 27 percent of the tenants at Peter Cooper and Stuyvesant Town are now exempt from it and pay market rents. But most, like Marilyn Phillips, 52, a nurse who has lived in Stuyvesant Town for 14 years, pay stabilized rents. She and her husband, a social worker, pay $1,700 a month for a two-bedroom apartment. News of the sale worried her. “It may mean we may no longer be able to live here,” she said. “The management is intent on making this luxury apartments and driving the working class out.” MetLife and real estate investors view the sale far differently. “It’ll be the largest sale of a single property in U.S. history,” said Dan Fasulo of Real Capital Analytics, a real estate research and consulting firm. “No doubt in my mind. It’s truly an unprecedented offering and an irreplaceable property. It would be impossible today to get a property of that scale in an urban location. And that neighborhood has become so desirable.” Stuyvesant Town and Peter Cooper Village together are nearly as large as the biggest single residential development in the country: Coop City in the Bronx, which has 15,372 units in 35 towers and 236 two-family houses. The MetLife land itself is about one-tenth the size of Central Park. To market the properties, MetLife has hired Darcy Stacom, a broker at CB Richard Ellis. According to real estate executives, the company began registering potential bidders last week, telling them that MetLife hoped to select a winner by November.
Published: August 30, 2006
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The company reserves the right not to sell if the offers fall short, but Robert Merck, who oversees real estate investments for MetLife, said, “We think the current market conditions are very favorable.”
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Graphic: The Big Deal
Already there are signs that bidding will be feverish. As one executive involved in the sale put it, “This is the ego dream of the world: 80 acres, 110 buildings, 11,000 apartments, covering 10 city blocks in Manhattan.” According to several bidders, the list of buyers who have signed up includes the most active developer in New York City, the Related Companies; one of the largest landlords, Glenwood Management; Tishman Speyer, which controls Rockefeller Center; two publicly traded real estate companies, Archstone and Vornado; the international bank UBS; and the Blackstone investment firm, as well as the Rudin, Durst and LeFrak real estate families. Given the size of the deal, buyers are expected to team up. ”You’ll see some interesting people stepping up to the plate for this one,” said William Rudin, whose family owns about 2,000 apartments in New York. This is the latest big transaction for MetLife. Last year the insurer sold its landmark tower at 1 Madison Avenue and the skyscraper at 200 Park Avenue, the former Pan Am building, for more than $2.6 billion. But it is not getting out of the real estate business. It has a $40 billion portfolio of properties around the globe. But its presence in New York City is far smaller today than when its headquarters, with its signature clock tower, lorded over Madison Avenue.
The company played a major civic role in the last century, building and running vast housing complexes like Parkchester in the Bronx and Riverton in Harlem, as well as Peter Cooper and Stuyvesant Town. Parkchester and Riverton were sold long ago. At the urging of the public works czar Robert Moses, MetLife built Stuyvesant Town and its slightly more affluent sister, Peter Cooper Village, in 1947, as housing for returning veterans where the city’s Gashouse District once stood. The company excluded blacks and unmarried people at first, until protests and lawsuits in the 1950’s and 60’s forced it to drop the barriers. The city acquired some of the land for the project through eminent domain and gave MetLife all the streets in the 18-block area. The city also froze property taxes for 25 years at the value of the land before redevelopment, according to Samuel Zipp, a historian who wrote his Ph.D. dissertation on urban renewal in New York City. Mr. Zipp, a visiting assistant professor of history at the University of California at Irvine, said that Stuyvesant Town and Peter Cooper Village served as a kind of urban Levittown, an early model for a new sort of city landscape that inspired later efforts in the 1950’s and 1960’s aimed at keeping city life affordable to the middle class. Among them was Lefrak City, a complex of 20 18-story buildings on 40 acres in Corona, Queens. Stuyvesant Town and Peter Cooper are already undergoing great changes. Older residents are dying off. Young well-heeled professionals are willing to pay the higher rents. There are students from New York University — here one year, gone the next. There are fewer families and more single people, some of them subdividing onebedroom apartments with partitions. A seven-story banner hanging down the side of a building on 14th Street announces, “Luxury rentals.” Old traditions are also disappearing. The corny Christmas music and antiquated ornaments are gone, said Ms. Wasserman, the filmmaker
who moved into Stuyvesant Town with her husband and son. Gone, too, is what she used to call the “friendly fascism” of the place: rules against playing on the grass, against sunbathing, against eating in the playgrounds, against running through sprinklers without shoes. “It’s becoming two different communities here — those that have the rent stabilization and those that don’t,” said David Weiss, a 34-yearold writer who lives in a rent-stabilized one-bedroom apartment with his wife and young son. The turnover among new arrivals is so high, he said, “My wife and I kind of joke that when we make friends with people we’ll ask if they’re in a rent-stabilized apartment.” Still, about 8,000 apartments remain under the city’s rent stabilization system. Even three-bedroom apartments remain in the hands of longtime residents still paying well under $2,000 a month. Investors will want a return. “They have to raise the rents or convert it to a condo,” said Leonard Grunstein, a lawyer who specializes in deals involving multifamily affordable housing. “Either event removes this as affordable housing stock. If this were removed, there are probably 22,000 workers who live there, most are two-family incomes, probably 15,000 employees are there. Where are they going to go?” Real estate executives are already poring over demographic information about the current tenants and considering long-term strategies, such as turning Peter Cooper Village into a condominium complex. That development sits on a rectangular piece of land bisected by a private road and the 3,000 apartments there tend to be larger, with more than one bathroom. In interviews yesterday, some older tenants living in rent-stabilized apartments said they were not worried about being priced out of their homes right away. “I’m not really that concerned about it,” said Elliott Landen, 77, who said he pays slightly over $1,000 a month for a onebedroom apartment. “I don’t think they’ll throw me out.”
But many said the people who will suffer most will be younger tenants holding out hope of raising children in Manhattan. One man, a 42year-old computer programmer, said he and his wife had given up their rent stabilized one-bedroom unit in Stuyvesant Town when their daughter was born and had moved into a market-rate two-bedroom. He said he figured that in about two years his family would “wind up in the suburbs.” “We’re at about $1,400 now,” said a woman named Evelyn, who declined to give her last name but described herself as a 77-year-old retired teacher who has lived with her husband in a three-bedroom apartment in Stuyvesant Town for 43 years. “If we die, whoever comes in will pay $3,500 or $4,000. This used to be a nice middleincome place. It’s no longer that.”
Spitzer Signals Concern Over Sale of Housing Tract
Tenants’ groups girding for a fight over the sale of Starrett City, the sprawling low- and middle-income housing complex on the south shore of Brooklyn, have a powerful new ally: Gov. Eliot Spitzer.
State officials say that the new governor, who campaigned in part on the need to preserve and expand the city’s stock of housing for working and middle-class New Yorkers, wants Starrett City to remain pretty much what it is today, an economically and racially mixed housing complex that is successful. Affordable housing has emerged as a thorny political issue with the recent $5.4-billion sale of two middle-class complexes, Stuyvesant Town and Peter Cooper Village in Manhattan, and skyrocketing rents across the city. Renamed Spring Creek Towers in 2002, Starrett City is the largest federally subsidized rental project in the country and continues to be widely known by its original name. Bids are due on Monday, with the longtime owners hoping to fetch more than $1 billion for the 46 brick towers and 5,881 apartments that are scattered across 140 acres bound by Canarsie, East New York and Jamaica Bay. The sale has been cloaked in secrecy and a strict confidentiality agreement that prohibits prospective buyers from talking to tenants, or to state and city officials. “Starrett City is ground zero for gentrification,” said Bertha Lewis, executive director of New York Acorn, a community organizing group that has been working with the local tenants’ association. The new owner “could wipe out the most successful and diverse affordable housing complex in the country.” The ownership group, led by Disque Dean, has told tenants that nothing will change immediately. The owners say they have a fiduciary duty to get the highest price, but insisted that the buyer would not suddenly transform the complex and that most tenants would continue to qualify for rent subsidies. But tenants and many local politicians fear that a billion-dollar price tag will prompt any new owner to drop out of the state’s MitchellLama program for middle-class tenants and raise rents, displacing
hundreds of tenants, even if many residents would initially be eligible for federal rent vouchers. Tenants also fear that in a push to make a profit, a new owner would cut services at Starrett City, whose buildings and landscaped grounds are well maintained. “One thing we’re striving for is to be able to keep rents in an area where we can handle it,” said the president of the Starrett tenants’ association, Marie Purnell, whose balcony has a view of the bay. “We have a mixture of Pakistanis, Russian Jews, Haitians, Italians and American blacks. My concern is that it continue the way it is. At 76, I want to die here.” Councilman Charles Barron vowed that Starrett City would not be gentrified: “There will be no Stuyvesant Town at Starrett City. It’s just not going to happen.” A spokeswoman for Mr. Spitzer, Christine Anderson, said he had serious concerns that the complex would no longer be affordable. “During the campaign,” she said, “he talked extensively about the need to preserve and improve the affordable housing we have, as well as the need to create even more affordable housing. He is willing to commit state resources, especially where the owners share our goal to protect long-term affordability.” State officials have some power over what happens. They hold Starrett’s $234.4 million interest-free mortgage and have the power to approve or reject any new owner. Development of vacant land on the site would require state and city approvals. One city official said that property taxes would increase by at least $12 million if the complex left the Mitchell-Lama program. On Wednesday, small groups of Starrett City residents and members of Acorn took their message to the Manhattan offices of five potential bidders: the Related Companies, Apollo Real Estate Advisors, Tishman Speyer Properties, Westbrook and Aimco. They did not get past the front desks, although some of the companies indicated that
they would not be bidders after all. A rally is planned for tomorrow and is expected to attract hundreds of tenants and many politicians, including City Council Speaker Christine C. Quinn According to real estate executives familiar with the sale, 12 bidders are registered. At least one, Berkshire L.L.C., has clashed with tenants’ groups at another Brooklyn complex. Another bidder said he would make an offer for the property that is far less than the $1.2 billion the seller expects. The sale of Starrett City has not generated the same frenzy among real estate investors as the bidding for Stuyvesant Town and Peter Cooper Village, where rents for three-quarters of the apartments were one-third to one-half of market rates. Rents at Starrett City, which are mostly subsidized by the government, may be close to market levels, real estate experts said. The complex was envisioned as a subsidized middle-class complex when it opened in 1975. But it had difficulty attracting enough tenants and over time developed a patchwork quilt of state and federal subsidies for low-, moderate- and middle-income tenants. The current owner acknowledged that a new owner would probably buy out of the Mitchell-Lama program. “We are convinced that Starrett City will continue to be an affordable, subsidized development with over 90 percent of the tenants qualified for rent subsidies,” said Martin J. McLaughlin, a spokesman for the owner, Starrett City Associates. Despite those assurances, state and city housing officials say that current tenants would be affected almost from the beginning. It is unclear whether there are enough federal rent vouchers available. More than 1,000 tenants whose spouses have died, or whose children have grown and moved out, may have to move to smaller apartments or pay higher rents. It is unlikely there are enough vacant onebedroom apartments for them.
Officials said that an additional 1,567 tenants would face $200-amonth rent increases, even if they received vouchers, or would fail to qualify for them because their income exceeded the federal guidelines. Jeannette Reyes, 39, has lived at Starrett City for 14 years, after moving from a building in East New York “that never had heat or hot water,” she said. Her older daughter recently graduated from the University of Tampa with the help of a Starrett City scholarship. “I’m hoping to provide a better future for the little one here,” she said, referring to her 2-year-old daughter bundled up in a stroller on a cold winter afternoon. “I could only do that here in Starrett.”
Big Landlord Close to Deal for a REIT in New York
By ANDREW ROSS SORKIN and TERRY PRISTIN Published: May 29, 2007
The real estate company that bought two prominent apartment complexes on Manhattan’s Lower East Side is trying to make another major acquisition in the New York market. The company, Tishman Speyer Properties, has joined with the investment bank Lehman Brothers and was close to a deal last night to buy Archstone-Smith Trust, the second-largest public apartment
owner in terms of market capitalization and asset value, for more than $20 billion, people involved in the talks said. The deal, which could be announced as early today, would be one of the largest privatizations of a public real estate investment trust. Still, people involved in the negotiations cautioned that the deal was not completed and it was possible the talks could collapse or be postponed. Under the terms, Tishman and Lehman would pay more than $14 billion for Archstone-Smith and assume about $6.3 billion in debt, according to people involved in the negotiations. Exact terms could not be learned last night. For its part, Lehman may create a fund that will allow its clients and high-net worth investors to invest in the real estate market. At the end of March, Archstone-Smith, which is based in Englewood, Colo., owned or had an ownership position in 344 complexes, representing more than 86,000 apartments, including units under construction. The REIT calls itself the largest public owner of apartments in Manhattan, including the Key West, a 207-unit, 13-story high-rise on Columbus Avenue near 96th Street, and the 627-unit Archstone Clinton on West 52nd Street between 10th and 11th Avenues. Some 57 percent of the REIT’s portfolio is in the New York metropolitan area, Southern California, the San Francisco Bay Area and Seattle. The news of the possibility of an impending deal stunned the industry. Though there had been speculation in recent weeks that private equity firms were about to begin focusing on apartment REITs, most industry analysts did not expect a company the size of Archstone-Smith to be in play.
Archstone-Smith, second only to Equity Residential Properties in size, is regarded as well-managed with prime buildings in cities like New York, Washington and Los Angeles, where it is difficult to add new supply. The equity firm, the Blackstone Group, paid $23 billion for Equity Office Properties Trust in February, and has sold large pieces of the REIT. But at least one analyst said that Archstone-Smith had been increasingly seen as a potential buyout target for its high-quality assets and its presence in crucial markets. Robert M. White, the president of Real Capital Analytics, a New York research company, said that although a few apartment REITs have been taken private, the sector had largely been bypassed during the wave of acquisitions that have swept through the publicly traded office and hotel companies. One concern, Mr. White said, was that when the condominium conversion trend halted about a year ago, many new apartments would be dumped on the market and the inventory would vastly exceed demand. “A lot of people thought it might be the beginning of the end,” he said. But those fears proved unfounded, he said. Barry Vinocur, the editor of REIT Wrap, a daily newsletter, said apartment REITs have been trading at a large discount to what the buildings are actually worth. In fact, he said, “their earnings growth have been the best of any sector in the REIT space.” In early May, Archstone-Smith announced earnings of $1.27 a share for the first quarter, up from 58 cents in the quarter a year ago.
Keven S. Lindemann, the director of real estate for SNL Financial, a research company in Charlottesville, Va., said that the deal made sense for a company like Tishman Speyer, which seeks high quality real estate. “This is such a collection of top-notch assets,” Mr. Lindemann said, “and it would take a lot of time and probably more capital to assemble a portfolio like this on a piece by piece basis.” The Archstone acqusition would add to Tishman Speyer’s international inventory of commercial properties, which includes Rockefeller Center and the Chrysler Building in Manhattan, the CityPoint building in London and the Lumiére office tower in Paris. It also owns developments in Latin America and has lately begun investing in India and China. In October, Tishman bought Stuyvesant Town and Peter Cooper Village for $5.4 billion — 80 acres of prime Manhattan land along the East River that included 110 buildings and 11,232 apartments. Less than three weeks after putting the headquarters of The New York Times Company in Times Square on the block, Tishman sold the building for $525 million, three times the $175 million it paid in November 2004. Analysts say the apartment sector tends to do well during a housing slump. And with the housing market cooling rapidly across the United States, stocks of apartment real estate investment trusts such as Archstone-Smith have performed strongly on the belief among some investors that former homeowners will once again turn to the rental market. Last year, Archstone-Smith’s stock rose 44 percent. This year, however, rising concern that rental prices may have peaked has caused the stocks of some apartment REITs to stagnate. Before a runup last Friday on takeover speculation, Archstone-Smith’s stock had fallen nearly 11 percent this year.
The chief executive of Tishman Speyer, Jerry I. Speyer, also plays a leading role in the civic and cultural life of New York. He is vice chairman of the Museum of Modern Art, an owner of the New York Yankees, a member of the Council of Foreign Relations and chairman of the Federal Reserve Bank of New York. He has been able to raise billions for real estate investment from pension funds, insurance companies and wealthy families like the Crowns of Chicago and the Agnellis of Italy. Julie Creswell contributed reporting.